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Seagate Shares Fall on Surprise Management Shift

MOUNTAIN VIEW, Calif. — Seagate Technology, a leading maker of computer hard drives, stunned its investors on Monday by replacing both its chief executive, William D. Watkins, and his principal lieutenant, David A. Wickersham.

Just one week ahead of its second-quarter financial report, Seagate dismissed Mr. Watkins as chief executive and named its chairman, Stephen J. Luczo, as his successor.

The company also said that Mr. Wickersham, the company’s president and chief operating officer, had resigned and been replaced by Robert Whitmore, executive vice president and chief technology officer.

Seagate declined to provide any explanation for the change in management, and nervous investors drove the company’s shares down 15.6 percent. The stock closed at $4.76, down 88 cents, and far below its 52-week high of about $24 last February.

“It’s certainly a surprising way to start the week,” said Richard Kugele, an analyst at Needham & Company, who has followed Seagate for years. “But there was a fair amount of talk in the industry that there would be some replacements at the top.”

The company, which has its main office in Scotts Valley, Calif., declined to make any executives available for interviews. “The board thought Steve was going to be the guy to take the company forward,” said Brian Ziel, a Seagate spokesman.

Seagate has been criticized for losing ground to its major rival, Western Digital, over the last couple of years in the market for hard drives used in laptops and consumer products.

Such issues have been exacerbated by a sharp downturn in technology purchases, which has taken a brutal toll on all companies that sell goods tied to computers.

Seagate has responded to declining sales by saying it plans to lay off about 10 percent of its employees in the United States, or about 800 people. The company said it would provide more detail about the cuts on Jan. 21 in a conference call to discuss its second-quarter results.

Last week, Mr. Watkins, known for his informal and candid speaking style, was making the interview rounds at the Consumer Electronics Show in Las Vegas, complaining about a major slowdown in interest for his company’s products. Meanwhile, his representatives continued to set up interviews with the executive for this month to discuss the company’s strategy.

Mr. Luczo was chief executive of Seagate from 1998 to 2004 and was named chairman in 2002. He oversaw Seagate’s leveraged buyout in 2000 and return to the public markets in 2002.

While the timing of the announcement proved jarring, Wall Street analysts said that some sort of change was inevitable given Seagate’s sweeping issues.

“This could be partly a backward-looking move tied to some of the company’s stumbles,” said Jayson Noland, a senior analyst at Robert W. Baird & Company. “But things are really bad for the entire industry right now.”

Mr. Wickersham, a respected executive who had been regarded as a likely successor to Mr. Watkins, apparently could not separate himself enough from the company’s woes to get the top job, according to Mr. Kugele.

“I thought he understood the business extremely well and had been a very positive face of the company toward investors,” Mr. Kugele said. “At the same time, there have been operational missteps, and he is not completely blameless here.”

A version of this article appears in print on , on Page B4 of the New York edition with the headline: In a Surprise, Seagate Chief And President Both Depart. Order Reprints|Today's Paper|Subscribe